The Peter Zeihan Podcast Series - Auto Tariffs and the Art of Routine Vehicle Maintenance || Peter Zeihan

Episode Date: April 3, 2025

Our next Live Q&A on Patreon is here! On April 9, Peter will join the Analyst members on Patreon for question time! In order to get in on the fun, join the 'Analyst tier' on Patreon before April 9.Join the Patreon here: https://www.patreon.com/PeterZeihanThe Trump administration announced a 25% tariff on imported cars and car parts. While this tariff isn't as severe as the others expected on April 2, it will still increase the cost of vehicles in the US by $2-3k on average.Full Newsletter: https://mailchi.mp/zeihan/immigration-and-auto-tariffs

Peter Zion here coming to you from Colorado. It is the 27th of March and late yesterday. Donald Trump initiated yet another tariff. I think this is the 87th tariff policy that we've had in the last six weeks. Oh my God. Or seven weeks, seven weeks. Anyway, 25% tariff on all imported cars and car parts. This is not the one that I was dreading. This one is actually not too bad considering the scope of all of the other. because if the car or the car part is produced within Canada, Mexico, and the United States, and is registered as an after product, two important ifs, then it gets a bypass. So if your car is made out of one half content that comes from somewhere else, you now have a 12.5% tariff on the vehicle.

It's still going to drive up the cost of vehicles in the United States on average by about $2,000, maybe $3,000 in some cases. But because most of these imported parts don't go back and forth. forth across borders in the NAFTA system, it's not nearly as bad as what a NAFTA tariff would have been, which is what Donald Trump is threatening for April 2nd. Anyway, this will kick in on April 2nd as well. Not all vehicles are made equal, and just because it's in a U.S. company does not necessarily mean that they don't use a lot of important content. Automotive is unique among the world's manufacturing sectors in that everyone produces some of everything because almost everybody needs cars at some level.

So the Germans make the good transmissions, the Mexicans make the mediocre transmissions, and the Chinese make the crap transmissions, just to pick one. So just because it's a Ford or a Chevy doesn't mean it doesn't have a lot of imported content. As a rule, the big three American automakers do have more. Changes model by model. And as a rule, the Japanese, most notably Toyota, also have a lot of North American content because they have this concept of build where you sell and they put their money where their mouth is, and they're trying to get on the right side of tariff and political issues.

Once you get into the Korean cars, it drops quite a bit, and once you get into the European cars, it really drops. Most of the European manufacturing centers that are in North America actually use almost 100%, in some cases 100% imported content from Europe. And then, of course, if you're getting a beamer that comes from Bavaria, it's probably 100% European content as well. Anyway, we're putting up this handy little chart So you can see of the top 25 models, which ones or which.

Generally, the closer you are down into the red towards zero, the more your vehicle is going to cost. And a quick reminder that this is just one of the tariffs that is hitting automotive. We've got another one that's in place already, and that's the 25% tax on imported aluminum in steel, which every vehicle has a lot of both of those. And then once we get to April 2nd, that's when Donald Trump is going to be announcing a lot more tariffs,

something he calls reciprocal tariffs. probably NAFTA tariffs, and then additional tariffs on everybody on the outside that he doesn't like. He calls them the dirty 15, and they're really just our 15 largest trading partners. So you put those three together. Remember, these all stack up with one another. They're cumulative, and you could easily see the cost of automobiles in the United States going up by $10,000 a vehicle, or maybe even a lot more based on where they come from. Now, the data in this graphic is from 2021. There is more recent data available from the Department of Transportation.

unfortunately because of the bonfire of staffing that is occurring in the federal government right now. It is not in an easily absorbable format, so it's going to take us a couple days to process it. And we will get that out as soon as is feasible, which reminds me. We'll be covering all of this and all of its antacillary effects. When we do our quarterly briefing, our question time, when people can ask me questions in real time on April 9, It is for our Patreon subscribers at the top tier. So sign up now and learn about all these tariffs as they happen, and then we'll pull it all together for you

and show where it's going to take the American and the global economy over the long run. See you soon.